-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Vuy7wwQ/bFXC5SqwuSnTuTGa3MGnc+BzxV2E0vlS5E1SxerS/b4EwpwG1ppemuUB uDLTbt4KNOZP27/qTqcC2w== 0000726513-94-000011.txt : 19940811 0000726513-94-000011.hdr.sgml : 19940811 ACCESSION NUMBER: 0000726513-94-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940626 FILED AS OF DATE: 19940810 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRIBUNE CO CENTRAL INDEX KEY: 0000726513 STANDARD INDUSTRIAL CLASSIFICATION: 2711 IRS NUMBER: 361880355 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08572 FILM NUMBER: 94542525 BUSINESS ADDRESS: STREET 1: 435 N MICHIGAN AVE CITY: CHICAGO STATE: IL ZIP: 60611 BUSINESS PHONE: 3122229100 10-Q 1 TRIBUNE 2ND QUARTER 1994 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 26, 1994 Commission file number 1-8572 TRIBUNE COMPANY (Exact name of registrant as specified in its charter) Delaware 36-1880355 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 435 North Michigan Avenue, Chicago, Illinois 60611 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (312) 222-9100 No Changes (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / At July 29, 1994 there were 67,517,894 shares outstanding of the Company's Common Stock (without par value). 1 PART I. FINANCIAL INFORMATION Item 1. Financial Statements. ---------------------
TRIBUNE COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands of dollars, except per share data) (Unaudited) Second Quarter Ended First Half Ended ------------------------------ ----------------------------- June 26, 1994 June 27, 1993 June 26, 1994 June 27, 1993 -------------- -------------- ------------- ------------- Operating revenues....................................... $ 573,749 $ 517,443 $1,056,571 $ 951,991 Operating expenses Cost of sales (exclusive of items shown below)................................... 287,201 275,472 529,046 514,890 Selling, general and administrative ..................... 135,175 110,284 265,199 221,328 Depreciation and amortization of intangible assets................................. 28,588 24,596 54,939 49,581 --------- --------- ---------- ---------- Total operating expenses................................. 450,964 410,352 849,184 785,799 --------- --------- ---------- ---------- Operating profit......................................... 122,785 107,091 207,387 166,192 Equity in QUNO net loss.................................. (636) (2,757) (9,759) (5,468) Gain on sale of QUNO stock............................... 39,381 - 39,381 - Interest income.......................................... 5,167 5,805 9,789 10,141 Interest expense......................................... (5,135) (5,878) (10,983) (13,993) --------- --------- --------- --------- Income before income taxes............................... 161,562 104,261 235,815 156,872 Income taxes............................................. (76,530) (41,976) (110,714) (64,936) --------- --------- --------- --------- Net income .............................................. 85,032 62,285 125,101 91,936 Preferred dividends, net of tax.......................... (4,643) (4,628) (9,287) (9,256) --------- --------- --------- --------- Net income attributable to common shares..................................... $ 80,389 $ 57,657 $ 115,814 $ 82,680 ========= ========= ========= ========= Net income per share: Primary.................................................. $ 1.19 $ .87 $ 1.72 $ 1.25 ========= ========= ========= ========= Fully diluted............................................ $ 1.09 $ .80 $ 1.58 $ 1.16 ========= ========= ========= ========= Dividends per common share............................... $ .26 $ .24 $ .52 $ .48 ========= ========= ========= ========= See Notes to Condensed Consolidated Financial Statements.
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TRIBUNE COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (In thousands of dollars) June 26, 1994 December 26, 1993 -------------- ----------------- (Unaudited) ASSETS Current assets Cash and short-term investments......................... $ 47,639 $ 18,524 Accounts receivable, net................................ 313,956 284,110 Broadcast rights........................................ 157,527 144,233 Inventories, prepaid expenses and other................. 53,595 44,392 ----------- ----------- Total current assets.................................... 572,717 491,259 ----------- ----------- Investment in and advances to QUNO...................... 258,942 250,923 Property, plant and equipment........................... 1,274,071 1,201,167 Accumulated depreciation................................ (636,909) (599,552) ----------- ----------- Net properties.......................................... 637,162 601,615 ----------- ----------- Broadcast rights........................................ 200,031 217,229 Intangible assets, net.................................. 829,268 719,965 Mortgage notes receivable from affiliates............... 83,732 119,437 Other................................................... 176,162 135,982 ----------- ----------- Total assets............................................ $ 2,758,014 $ 2,536,410 =========== =========== LIABILITIES AND STOCKHOLDERS' INVESTMENT Current liabilities Accounts payable........................................ $ 92,953 $ 85,334 Contracts payable for broadcast rights.................. 150,725 142,686 Accrued expenses and other current liabilities.......... 316,270 277,007 ---------- ---------- Total current liabilities............................... 559,948 505,027 ---------- ---------- Long-term debt.......................................... 456,206 510,838 Deferred income taxes................................... 141,479 87,605 Contracts payable for broadcast rights.................. 195,723 194,846 Other................................................... 147,450 142,467 ---------- ---------- Total liabilities....................................... 1,500,806 1,440,783 ---------- ---------- Stockholders' investment Series B convertible preferred stock.................... 329,286 335,532 Common stock............................................ 1,018 1,018 Additional paid-in capital.............................. 108,392 105,819 Retained earnings....................................... 1,670,588 1,589,695 Treasury stock (at cost)................................ (593,264) (607,332) Unearned compensation related to ESOP................... (297,479) (298,969) Cumulative translation adjustment....................... (20,222) (30,136) Unrealized gain on investments.......................... 58,889 - ----------- ----------- Total stockholders' investment.......................... 1,257,208 1,095,627 ----------- ----------- Total liabilities and stockholders' investment.......... $ 2,758,014 $ 2,536,410 =========== =========== See Notes to Condensed Consolidated Financial Statements.
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TRIBUNE COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands of dollars) (Unaudited) First Half Ended ------------------------------ June 26, 1994 June 27, 1993 -------------- -------------- Operations Net income................................................... $125,101 $ 91,936 Adjustments to reconcile net income to net cash provided by operations: Equity in QUNO net loss.............................. 9,759 5,468 Gain on sale of QUNO stock........................... (39,381) - Depreciation and amortization of intangible assets............................................. 54,939 49,581 Other, net........................................... 47,400 20,577 --------- --------- Net cash provided by operations.............................. 197,818 167,562 --------- --------- Investments Capital expenditures......................................... (40,264) (37,900) Acquisitions................................................. (118,920) (19,920) Proceeds from sale of QUNO stock............................. 94,936 - Repayment of note receivable from QUNO....................... - 179,846 Purchase of mortgage note.................................... - (35,500) Other, net................................................... (15,949) (11,822) --------- --------- Net cash provided by (used for) investments.................. (80,197) 74,704 --------- --------- Financing Repayments of long-term debt................................. (54,670) (207,798) Sale of common stock to employees, net....................... 10,372 28,136 Dividends.................................................... (44,208) (40,890) Redemption of preferred stock................................ - (3,905) --------- --------- Net cash used for financing.................................. (88,506) (224,457) --------- --------- Net increase in cash and short-term investments.............. 29,115 17,809 --------- --------- Cash and short-term investments at the beginning of year..... 18,524 16,768 --------- --------- Cash and short-term investments at the end of quarter........ $ 47,639 $ 34,577 ========= ========= See Notes to Condensed Consolidated Financial Statements.
4 TRIBUNE COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 1: - ------ In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly the financial position of Tribune Company and its subsidiaries as of June 26, 1994 and the results of their operations for the quarters and first halves ended June 26, 1994 and June 27, 1993 and cash flows for the first halves ended June 26, 1994 and June 27, 1993. All adjustments reflected in the accompanying unaudited condensed consolidated financial statements are of a normal recurring nature. Results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Certain prior year amounts have been reclassified to conform with the 1994 presentation. Note 2: - ------ Primary net income per share has been computed by dividing net income attributable to common shares by the weighted average number of common shares outstanding during the periods. Fully diluted net income per share has been computed based on the assumption that all of the convertible preferred shares have been converted into common shares. The numbers of common shares used for computing primary and fully diluted net income per share were as follows (in thousands): Second Quarter Ended First Half Ended 1994 1993 1994 1993 ------- ------ ------ ------ Primary 67,379 66,230 67,232 66,010 Fully diluted 74,411 73,268 74,309 73,115 5 Note 3: - ------ On April 14, 1994, Tribune reduced its ownership holdings in QUNO Corporation ("QUNO") by selling 5.5 million shares of QUNO common stock. With this sale, Tribune reduced its ownership interest in QUNO from 59% to 34%. The sale of the shares resulted in an after-tax gain of approximately $13 million, or $.19 per share on a primary basis, which was recorded in the second quarter of 1994. The Company retains 7.5 million shares of QUNO's 22 million common shares outstanding and also holds a U.S. $138.8 million (face value) subordinated debenture, convertible into 11.7 million voting common shares of QUNO. Note 4: - ------ Tribune acquired The Wright Group on February 18, 1994, for approximately $100 million in cash. The Wright Group is a leading publisher of "whole language" educational materials for the elementary school market. On April 6, 1994, Tribune completed the purchase of Boston independent television station WLVI (Ch. 56) for approximately $25 million in cash. The acquisition increases the number of Tribune-owned TV stations to eight. On June 30, 1994, Tribune completed the acquisition of Farm Journal Inc. for approximately $17.5 million in cash. Farm Journal Inc. is the publisher of Farm Journal, the nation's leading farm magazine. These acquisitions are being accounted for by the purchase method, and accordingly, the results of operations of the companies have been or will be included in the consolidated financial statements since or from their respective dates of acquisition. 6 Note 5: - ------ The Company adopted Financial Accounting Standards Board Statement No. 115, "Accounting for Certain Investments in Debt and Equity Securities", in the first quarter of 1994. This statement generally requires that the Company record investments in debt securities and publicly traded equity securities at their market value, except for non-convertible debt securities which the Company intends to hold to maturity and equity securities which are accounted for using the equity method. The market value of the Company's long-term investments in less-than-20% owned publicly traded companies was approximately $36 million in excess of the investments' $10 million carrying value at June 26, 1994. The Company also holds a $138.8 million (face value) convertible debenture issued by QUNO Corporation. The market value of this debenture, based on the $23.875 Canadian quoted market price per share of the underlying QUNO common stock at June 26, 1994, was approximately $201 million. FAS 115 requires that changes in market value from historical cost for these investments be reported, net of tax, in a separate component of stockholders' investment until realized. Accordingly, the Company's June 26, 1994, Condensed Consolidated Statement of Financial Position reflects net unrealized gain on investments of approximately $59 million. The adoption of this statement had no impact on net income, and prior year financial statements are not restated. Note 6: - ------ Financial data for each of the Company's business segments is as follows (in thousands):
Second Quarter Ended First Half Ended ------------------------------ ------------------------------ June 26, 1994 June 27, 1993 June 26, 1994 June 27, 1993 ------------- ------------- ------------- ------------- Operating revenues Publishing.............................................. $ 351,918 $ 301,536 $ 688,990 $ 596,119 Broadcasting and Entertainment.......................... 223,085 216,903 370,033 357,884 Intercompany............................................ (1,254) (996) (2,452) (2,012) --------- --------- ---------- ---------- Total operating revenues................................ $ 573,749 $ 517,443 $1,056,571 $ 951,991 ========= ========= ========== ========== Operating profit Publishing.............................................. $ 78,956 $ 63,697 $ 149,523 $ 119,426 Broadcasting and Entertainment.......................... 50,247 49,254 70,622 58,424 Corporate expenses...................................... (6,418) (5,860) (12,758) (11,658) --------- --------- --------- ---------- Total operating profit.................................. $ 122,785 $ 107,091 $ 207,387 $ 166,192 ========= ========= ========= ==========
7 Item 2. Management's Discussion and Analysis of Financial Condition and --------------------------------------------------------------- Results of Operations. ---------------------- The following discussion compares the results of operations of Tribune Company and its subsidiaries (the "Company") for the second quarter of 1994 to the second quarter of 1993 and for the first half of 1994 to the first half of 1993. SIGNIFICANT EVENTS AND TRENDS - ----------------------------- The major league baseball players' contract expired on December 31, 1993. During 1994, representatives of the Major League Baseball Players Association ("MLBPA") and the owners have continued to negotiate for a new players' contract. On July 28, 1994, the MLBPA declared that its membership may initiate a strike on Friday, August 12, 1994. This action, if taken, will impact the Company's Chicago Cubs baseball, television and radio operations. While the broadcast stations have contingency plans in place for replacement programming, the Cubs would experience a loss of revenues and operating profit that would reduce the Company's earnings growth in the third quarter of 1994. The actual impact on the Cubs' operating results is uncertain due to the unknown length of a possible work stoppage. In addition, the Company cannot predict the ultimate outcome of the negotiations. RESULTS OF OPERATIONS - --------------------- The Company's results of operations, when examined on a quarterly basis, reflect the seasonality of advertising, which affects the results of both publishing and broadcasting and entertainment. Second and fourth quarter advertising revenues are typically higher than first and third quarter revenues. Results for the 1994 second quarter reflect this seasonal pattern. 8 CONSOLIDATED The Company's consolidated operating results for 1994 and the percentage changes from 1993 were as follows: (Dollars in millions, Second Quarter First Half except per share amounts) 1994 Change 1994 Change ------ ------- ------- ----- Operating revenues $ 574 +11% $1,057 +11% Operating profit $ 123 +15% $ 207 +25% Equity in QUNO net loss $ (1) +77% $ (10) -78% Gain on sale of QUNO stock $ 39 * $ 39 * Net income $ 85 +37% $ 125 +36% Primary net income per share $1.19 +37% $ 1.72 +38% * Not Meaningful On April 14, 1994, the Company reduced its ownership holdings in QUNO Corporation ("QUNO") by selling 5.5 million shares of QUNO common stock. With this sale, the Company reduced its ownership interest in QUNO from 59% to 34%. The sale of the shares resulted in an after-tax gain of approximately $13 million, or $.19 per share on a primary basis. The pretax gain on the sale was $39 million. Net Income Per Share -- Primary net income per share for the 1994 second quarter rose 37% to $1.19 from $.87 in 1993. For the 1994 first half, primary net income per share rose 38% to $1.72 from $1.25 in 1993. Excluding the $13 million net-of-tax gain on the sale of QUNO common stock, primary net income per share increased 15% for the 1994 second quarter and 22% for the 1994 first half. These increases were due to higher operating profit from the media businesses and, in the second quarter, lower equity losses from QUNO. Operating Profit and Revenues -- The Company's 1994 consolidated operating profit by business segment and the percentage changes from 1993 were as follows: 9 (Dollars in millions) Second Quarter First Half 1994 Change 1994 Change ------ ------- ----- ------ Publishing $ 79 +24% $149 +25% Broadcasting & Entertainment 50 + 2% 71 +21% Corporate expenses (6) +10% (13) + 9% ----- ----- Total operating profit $123 +15% $207 +25% Publishing reported a 24% increase in operating profit for the 1994 second quarter and a 25% increase for the first half, due primarily to higher advertising revenues and, to a lesser extent, contributions from three acquisitions - Contemporary Books in July 1993, Compton's Multimedia in September 1993 and The Wright Group in February 1994. Broadcasting and entertainment improved in both periods of 1994 due primarily to increased television revenues, offset in the second quarter by lower baseball revenues. Second quarter 1994 broadcasting and entertainment results include independent Boston television station WLVI (Ch.56), acquired on April 6, 1994. Consolidated operating revenues for the 1994 second quarter rose 11% to $574 million from $517 million. Publishing operating revenues increased 17%, and broadcasting and entertainment revenues increased 3%. Consolidated operating revenues also rose 11% for the 1994 first half to $1.06 billion from $952 million. Publishing revenues increased 16% and broadcasting and entertainment revenues increased 3%. Operating Expenses -- Consolidated operating expenses increased for both the quarter and the first half as follows: (Dollars in millions) Second Quarter First Half 1994 Change 1994 Change ------ ------- ----- ------ Cost of sales $287 + 4% $529 + 3% Selling, general & administrative 135 +23% 265 +20% Depreciation & amortization of intangible assets 29 +16% 55 +11% ------ ----- Total operating expenses $451 +10% $849 + 8% 10 The increases in cost of sales in 1994 were primarily due to the new businesses acquired and higher compensation costs, partially offset by lower newsprint and ink expense and programming costs. Excluding expenses of the four recent acquisitions, cost of sales increased less than 1%, or $1 million, in the second quarter and decreased 2%, or $8 million, in the first half. Excluding acquisitions, compensation expense increased $4 million, or 4%, for the quarter and $8 million, or 5%, for the half. Newsprint and ink expense decreased $3 million, or 5%, for the quarter and $5 million, or 5%, for the first half. Programming costs declined $3 million, or 5%, in the second quarter and $13 million, or 11%, in the first half of 1994. The increases in selling, general and administrative (SG&A) expenses in 1994 were primarily attributable to the new businesses acquired, higher compensation costs and increased sales costs. Excluding the new businesses, SG&A expenses increased $10 million, or 9%, in the second quarter and $21 million, or 9%, in the first half. These increases were due primarily to higher compensation costs of $4 million, or 8%, for the quarter and $6 million, or 6%, for the half and increased sales costs. Sales expense increased $5 million for the quarter and $9 million for the first half due to higher sales levels. The increases in depreciation and amortization of intangible assets reflect the addition of the four acquisitions and capital expenditures made in 1993, primarily at the Company's Chicago newspaper printing facility. PUBLISHING Operating Profit and Revenues -- Publishing operating profit for the 1994 second quarter was up 24% to $79 million from $64 million, and for the first half was up 25% to $149 million, due principally to higher advertising revenues and, to a lesser extent, contributions of the recently acquired businesses. Operating margins for the second quarter of 1994 increased to 22.4% from 21.1% in 1993. Excluding the profit contributions of the recently acquired companies, operating profit grew 18% in the second quarter and 21% in the first half. Operating revenues for the second quarter were up 17% to $352 million from $302 million in 1993, and for the first half increased 16% to $689 million from $596 million. Excluding the three recently acquired companies, revenues increased $22 million, or 7%, in the second quarter of 1994 and $45 million, or 7%, in the first half due in both periods to a 9% increase in newspaper advertising revenues. Publishing group revenues by classification for 1994 and the percentage changes from 1993 were as follows: 11 Second Quarter First Half (Dollars in millions) 1994 Change 1994 Change ------ ------ ------ ------ Advertising Retail $113 + 6% $217 + 5% General 33 + 7% 69 + 12% Classified 99 + 14% 194 + 13% ------ ----- Total advertising 245 + 9% 480 + 9% Circulation 61 - 124 - Other 46 +174% 85 +150% ------ ----- Total revenues $352 + 17% $689 + 16% Retail advertising revenues for the 1994 second quarter and first half increased mainly due to improvements reported in the department store and food and drug categories in Chicago and Orlando, and the department store category in Fort Lauderdale. General advertising revenues for both the quarter and the first half increased due principally to higher financial and transportation advertising in Chicago and Orlando. Classified advertising revenues for the second quarter and year-to-date periods rose mainly due to increased help wanted advertising. Advertising linage for 1994 reflects increases in all categories for both the quarter and the first half, led by part run and classified full run advertising. Total linage increased 7% for both the quarter and the first half, reflecting the generally improved advertising climate. The following summary presents advertising linage for the second quarter and first half. Second Quarter First Half (Inches in thousands) 1994 Change 1994 Change ------ ------- ----- ------ Full run Retail 1,146 + 5% 2,224 + 5% General 183 + 9% 362 +12% Classified 1,773 + 6% 3,504 + 7% ------ ------ Total full run 3,102 + 6% 6,090 + 6% Part run 2,768 +11% 5,316 + 8% Preprint 2,597 + 4% 4,896 + 8% ------ ------ Total inches 8,467 + 7% 16,302 + 7% 12 Circulation revenues were unchanged in both the 1994 second quarter and first half. Total average daily circulation decreased 1% to 1,365,000 copies in the second quarter, and total average Sunday circulation also decreased 1% to 2,003,000 copies. For the first half, total average daily circulation decreased 1% to 1,385,000 copies from 1,402,000, while total average Sunday circulation decreased 1% to 2,047,000 from 2,062,000. Other revenues are derived from publishing books and information in print and digital formats; advertising placement services; the syndication of columns, features and comics to newspapers; commercial printing operations; direct mail operations; and other publishing-related activities. The increase in other revenues for both periods in 1994 resulted mainly from the 1993 acquisitions of Contemporary Books in late July and Compton's in mid-September and the 1994 acquisition of The Wright Group in February. Excluding these acquisitions, other revenues increased 7% for the quarter and 9% in the first half, reflecting higher revenues from direct mail and advertising placement services. Operating Expenses -- Publishing operating expenses increased 15%, or $35 million, in the second quarter of 1994 and 13%, or $63 million, in the first half. Excluding the three acquisitions, operating expenses increased 4% in both 1994 periods. These increases were mainly due to higher compensation costs, increased circulation costs and start up costs on new ventures. Compensation costs rose 5%, or $4 million, in the 1994 second quarter and 4%, or $7 million, in the first half. Circulation costs rose 7% for both the quarter and the first half, or $2 million and $5 million, respectively, primarily due to higher postage and delivery expense for expanding total market coverage volume in Chicago. These increases were partially offset by a decline in newsprint and ink expense of $3 million, or 5%, in the 1994 second quarter and $5 million, or 5%, in the first half. The average cost of newsprint consumed declined 14% in the second quarter and 12% in the first half, while consumption increased 9% in the quarter and 8% in the half. BROADCASTING AND ENTERTAINMENT Operating Profit and Revenues -- Broadcasting and entertainment operating profit for the second quarter of 1994 was $50 million, up 2% from $49 million, and was $71 million for the 1994 first half, up 21% from $58 million in 1993. The increased operating profit was mainly due to higher television revenues and lower programming costs, offset in the second quarter by lower radio and entertainment results. Entertainment results, which include baseball, were impacted by lower revenues, startup losses for new ventures such as "The Road" and TV Food Network and higher expenses at the Chicago Cubs. 13 Operating revenues for the group for 1994 and the percentage changes from 1993 were as follows: Second Quarter First Half (Dollars in millions) 1994 Change 1994 Change ------ ------- ----- ------ Television $168 +11% $286 + 9% Radio 16 - 4% 27 - 1% Entertainment 39 -20% 57 -15% ------ ----- Total revenues $223 + 3% $370 + 3% Television revenues for the second quarter and first half of 1994 increased largely due to higher revenues at WGN-Chicago, WPIX-New York and WPHL-Philadelphia, and the addition of WLVI-Boston in April, 1994. Excluding WLVI, television revenues were up 6% in both the 1994 second quarter and first half. Radio revenues decreased in 1994, primarily due to declines at WGN-Chicago in the second quarter. Entertainment revenues decreased $10 million for both the second quarter and the first half due to fewer shows in syndication, including the cancellation of "The Joan Rivers Show," and lower national television revenues from Major League Baseball. This decline reflects the expiration of baseball's contract with CBS at the end of the 1993 season and the start of the new joint venture agreements with NBC and ABC this season. Operating Expenses -- Operating expenses for the group increased 3%, or $5 million, in the second quarter and were unchanged in the first half. The second quarter increase was principally due to the addition of WLVI- Boston, higher compensation costs and startup losses for "The Road" and TV Food Network, offset partially by a decrease in programming costs. Excluding WLVI, second quarter 1994 operating expenses were flat, and first half expenses decreased 2%. Excluding WLVI, programming costs decreased 8%, or $5 million, for the quarter and 13%, or $15 million, for the first half due to the airing of lower cost programs at the television stations and a reduction in production costs due to a lower level of original programming at Tribune Entertainment. Compensation costs increased 4%, or $2 million, in the second quarter and 5%, or $5 million, in the first half. The increases were primarily due to increased compensation at the television stations. 14 EQUITY IN QUNO NET LOSS The Company's equity in QUNO's net loss, after interest expense and taxes, was $0.6 million for the second quarter of 1994 and $10 million for the first half, which reduced primary net income per share by $.01 and $.15, respectively. In 1993, Tribune's share of QUNO's net loss was $3 million in the second quarter and $5 million in the first half, which reduced Tribune's primary net income per share by $.04 and $.08, respectively. QUNO had operating income in the 1994 second quarter of $1 million versus an operating loss of $4 million in 1993. The improvement in the second quarter was primarily due to lower non-cash foreign currency exchange losses. Average newsprint selling prices declined 6% from the 1993 second quarter, while shipments declined 3%. QUNO's first half operating loss was $14 million in 1994 compared to $4 million in 1993. QUNO's first half 1994 operating loss was due to lower revenues, resulting from lower newsprint selling prices, and $7 million higher non-cash foreign currency exchange losses due to the weaker Canadian dollar since year-end 1993. For the half, average newsprint prices declined 9%, while shipments were down 1%. INTEREST INCOME AND EXPENSE Interest income decreased 11% to $5 million for the second quarter and 3% to $10 million for the first half of 1994. Interest expense decreased 13% to $5 million in the second quarter and 22% to $11 million in the first half due to lower debt levels. INCOME TAX EXPENSE The Company's effective income tax rate, excluding equity in QUNO's net loss and the gain on the sale of QUNO common stock, increased to 40.9% in the first half of 1994 from 40.0% in the 1993 first half, and in the 1994 second quarter increased to 40.8% from 39.2% last year. 15 FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES - ---------------------------------------------------- Net cash provided by operations for the first half of 1994 was $198 million compared to $168 million in the first half of 1993. The increase was due primarily to higher net income and changes in working capital. Net cash used for investments was $80 million for the first half of 1994 compared to $75 million provided by investments for the corresponding 1993 period. The 1994 first half included $95 million of proceeds from the sale of 5.5 million shares of QUNO common stock, the acquisition of The Wright Group in February 1994 for approximately $100 million in cash, the acquisition of WLVI-Boston (Ch. 56) in April 1994 for approximately $25 million in cash and capital expenditures of $40 million. On June 30, 1994, the Company completed the acquisition of Farm Journal Inc. for approximately $17.5 million in cash. Farm Journal Inc. is the publisher of Farm Journal, the nation's leading farm magazine. These acquisitions were financed with available cash. The 1993 period included intercompany debt repayments of $180 million received from QUNO as a result of its initial public offering and debt issuances. In March 1994, Tribune contributed to a partnership in which it had a 50% interest, the $35 million mortgage note it held on a building owned by the partnership. This increased the Company's ownership interest in the partnership to 99%. The partnership's financial statements are consolidated in Tribune's consolidated financial statements since the date of the mortgage note contribution. Capital expenditures for fiscal year 1994 are expected to be approximately $95 million, related to a variety of modernization and normal replacement projects. Net cash used for financing activities in the 1994 first half was $89 million compared to $224 million in 1993. Net cash used for financing activities in 1994 included debt repayment of $55 million and dividends of $44 million. The first half dividends increased 8% to $.52 per share from $.48 per share. Net cash used for financing activities in 1993 included a $208 million reduction in debt primarily funded from the proceeds received from the QUNO stock offering and debt financing. At June 26, 1994, the Company had authorization to repurchase an additional 900,000 share of its common stock. The Company expects to fund capital expenditures, dividends and other operating requirements for the remainder of 1994 primarily with net cash provided by operations. 16 PART II. OTHER INFORMATION Item 5. Other Information. ------------------- The computation of the ratios of earnings to fixed charges, filed herewith as Exhibit 12, is incorporated herein by reference. Item 6. Exhibits and Reports on Form 8-K. --------------------------------- (a) Exhibits. 11 - Statements of computation of primary and fully diluted net income per share. 12 - Computation of ratios of earnings to fixed charges. (b) Reports on Form 8-K. No reports have been filed on Form 8-K during this quarter. 17 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TRIBUNE COMPANY (Registrant) Date: August 9, 1994 R. Mark Mallory Vice President and Controller (on behalf of the Registrant and as chief accounting officer) 18
TRIBUNE COMPANY Exhibit 11 STATEMENTS OF COMPUTATION OF PRIMARY AND FULLY DILUTED NET INCOME PER SHARE (In thousands, except per share amounts) Second Quarter Ended First Half Ended June 26, 1994 June 27, 1993 June 26, 1994 June 27, 1993 ------------- ------------- ------------- ------------- PRIMARY - ------- Net income $85,032 $62,285 $125,101 $91,936 Preferred dividends, net of tax (4,643) (4,628) (9,287) (9,256) ------------- ------------- ------------ ------------- Net income attributable to common shares $80,389 $57,657 $115,814 $82,680 ------------- ------------- ------------ ------------- Weighted average common shares outstanding 67,379 66,230 67,232 66,010 ------------- ------------- ------------- ------------- Primary net income per share $1.19 $ .87 $1.72 $1.25 ============= ============= ============= ============= FULLY DILUTED - ------------- Net Income $85,032 $62,285 $125,101 $91,936 Additional ESOP contribution required assuming all preferred shares were converted, net of tax (2,970) (3,159) (5,940) (6,318) Assumed elimination of tax benefit on certain ESOP preferred dividends (704) (547) (1,409) (1,094) ------------- ------------- ------------- ------------- Adjusted net income $81,358 $58,579 $117,752 $84,524 ------------- ------------- ------------- ------------- Weighted average common shares outstanding 67,379 66,230 67,232 66,010 Assumed conversion of preferred shares into common shares 6,027 6,129 6,027 6,129 Assumed exercise of stock options, net of common shares assumed repurchased with the proceeds 1,005 909 1,050 976 ------------- ------------- ------------- ------------- Adjusted weighted average common shares outstanding 74,411 73,268 74,309 73,115 ------------- ------------- ------------- ------------- Fully diluted net income per share $1.09 $ .80 $1.58 $1.16 ============= ============= ============= ============= See Notes to Consolidated Financial Statements.
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Exhibit 12 TRIBUNE COMPANY COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES (In thousands of dollars, except ratios) First Half Full Year Ended --------------------------------------------------------- 6/26/94 1993 1992 1991 1990 1989 ---------- --------- --------- --------- --------- --------- Net income (loss) before cumulative effects of accounting changes $125,101 $188,606 $136,625 $141,981 ($63,533) $242,421 Add: Income tax expense (benefit) 110,714 143,821 96,266 99,894 (30,695) 168,463 Loss on less than 50%-owned equity investments 15,047 20,212 1,903 1,107 2,285 2,221 ---------- --------- --------- --------- --------- --------- Sub total 250,862 352,639 234,794 242,982 (91,943) 413,105 ---------- --------- --------- --------- --------- --------- Fixed charge adjustments Add: Interest expense 10,983 24,660 49,254 63,083 53,576 47,866 Amortization of capitalized interest 1,195 2,392 5,304 5,258 4,850 4,098 Interest component of rental expense (A) 4,446 8,732 9,329 9,047 14,467 12,333 ---------- --------- --------- --------- --------- --------- Earnings (loss), as adjusted $267,486 $388,423 $298,681 $320,370 ($19,050) $477,402 ========== ========= ========= ========= ========= ========= Fixed charges: Interest expense $10,983 $24,660 $49,254 $63,083 $53,576 $47,866 Interest capitalized - 1,099 3,445 1,976 8,652 13,614 Interest component of rental expense (A) 4,446 8,732 9,329 9,047 14,467 12,333 Interest related to guaranteed ESOP debt (B) 12,314 25,742 27,019 27,500 27,757 20,508 ---------- --------- --------- --------- --------- --------- Total fixed charges $27,743 $60,233 $89,047 $101,606 $104,452 $94,321 ========== ========= ========= ========= ========= ========= Ratio of Earnings to Fixed Charges 9.6 6.4 3.4 3.2 (C) 5.1 ---------- --------- --------- --------- --------- --------- (A) Represents a portion of rental expense incurred by the Company, which is a reasonable approximation of the interest cost component of such expense. (B) Tribune Company guarantees the debt of its Employee Stock Ownership Plan (ESOP). (C) The net loss for 1990 reflects an after-tax non-recurring loss of $185 million ($295 million before income taxes) relating to the sale of the New York Daily News. Excluding this non-recurring item, the ratio for 1990 was 2.6. As a result of the loss incurred for the full-year 1990, the Company was unable to cover the indicated fixed charges. The Company's loss, as adjusted, plus the indicated fixed charges for 1990 totaled $124 million.
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